1. The Act of the General Assembly of Missouri approved March
18, 1871, which provides that
"It shall be lawful for the council of any city, or the trustees
of any incorporated town, to purchase lands, and to donate, lease,
or sell the same to any railroad company upon such terms and
conditions as such board may deem proper, and for the purposes of
assisting and inducing such railroad company to locate and build
machine shops or other improvements upon such lands, and, for such
purposes to levy taxes upon the taxable property of such city or
town, and to borrow money and to issue the bonds of such city or
town for such purposes,
provided a majority of the
qualified voters of such town or city, at a special election to be
held therein, shall assent to such purchase and donation"
is void, it being in conflict with sec. 14 of art. 11 of the
constitution adopted in 1865, which declares that
"The general assembly shall not authorize any county, city, or
town to become a stockholder in or to loan its credit to any
company, association, or corporation, unless two-thirds of the
qualified voters of such county, city, or town at a regular or
special election to be held therein shall assent thereto."
2. The provision which prohibits the creation of an indebtedness
by a direct loan of municipal credit does not permit the indirect
use of such credit for the same purpose.
3. The Act of Feb. 16, 1872, forbidding, under certain penalties
therein prescribed, the officers of a municipality in its behalf to
loan the credit thereof, or donate to or subscribe stock in any
railroad or other company, without the previous assent of
two-thirds of the qualified voters, is merely prohibitory in its
character, and confers no authority on those officers when such
assent was given.
4.
Held, therefore, that the bonds of the "municipal
corporation of the inhabitants of the Town of Moberly," in the
County of Randolph, in the State of Missouri, dated May 1, 1872,
and reciting that they are
"issued in pursuance of an election held in said town on the
twenty-sixth day of March, A.D. 1872, to decide whether said town
should purchase and donate to the St. Louis, Kansas City, and
Northern Railway Company two hundred acres of land for machine shop
purposes, the result of said election being two hundred and
twenty-eight votes for the purchase and donation and one vote
against the purchase and donation, and, in pursuance to orders of
the board of trustees of the inhabitants of the Town of Moberly,
made on the eighteenth day of April, A.D. 1872, which orders were
made in accordance with an Act of the General Assembly of the State
of Missouri entitled 'An Act to authorize cities and towns to
purchase lands, and to donate, lease, or sell the same to railroad
companies,' approved March 18, A.D. 1870,"
are void.
The plaintiff is a citizen of the State of Illinois. The
defendant
Page 103 U. S. 581
is the City of Moberly, a municipal corporation of the State of
Missouri. This action was brought to recover judgment upon several
interest coupons, originally annexed to, but now detached from,
bonds issued by the city for the purchase of lands, consisting of
two hundred acres, to be donated to the St. Louis, Kansas City, and
Northern Railway Company, for "machine shop purposes." The petition
-- which is the designation given to the first pleading in the
action -- avers that on the 1st of May, 1872, the city issued fifty
bonds, similar in form, differing only in their numbers, each for
$500, to each of which twenty coupons were attached, each for the
sum of $25, payable on the first day of November and of May of each
year, and numbered from one to twenty; and it sets forth a copy of
one of the bonds and coupons, as follows:
"
Moberly Machine Shop Bonds"
"No. ___] UNITED STATES OF AMERICA [$500"
"Know all men by these presents, that the 'municipal corporation
of the inhabitants of the Town of Moberly,' in the County of
Randolph, in the State of Missouri, acknowledges itself indebted
and firmly bound to W. F. Burrows or bearer in the sum of five
hundred dollars, in current funds, which sum the said inhabitants
of the Town of Moberly hereby promise to pay to the said W. F.
Burrows or bearer, at the Bank of America, in the City of New York,
ten years after the date of this bond, together with interest
thereon from date at the rate of ten percent per annum, which
interest shall be paid semiannually, in current funds, on the
presentation and surrender at said bank of the annexed coupons as
they severally become due and payable, but this bond is payable at
the option of the said inhabitants of the Town of Moberly at any
time after three years from the date hereof, and is payable only by
a special tax on all the real estate and personal property lying
and being within the corporate limits of said town."
"This bond is issued in pursuance of an election held in said
town on the 26th day of March, A.D. 1872, to decide whether said
town should purchase and donate to the St. Louis, Kansas City, and
Northern Railway Company two hundred acres of land for machine shop
purposes, the result of said election being two hundred and
twenty-eight votes for the purchase and donation, and one vote
against the purchase and donation;
Page 103 U. S. 582
and in pursuance to orders of the board of trustees of the
inhabitants of the Town of Moberly, made on the eighteenth day of
April, A.D. 1872, which orders were made in accordance with an act
of the General Assembly of the State of Missouri, entitled 'An Act
to authorize cities and towns to purchase lands and to donate,
lease, or sell the same to railroad companies,' approved March
18th, A.D. 1871."
"In witness whereof, the said inhabitants of the Town of Moberly
have executed this bond, by the chairman of the board of trustees
of said town signing his name thereto, and by the clerk of said
board of trustees, by order of said board, attesting the same and
affixing thereto his signature and the seal of said corporation, in
the Town of Moberly, County of Randolph, State of Missouri, on the
first day of May, 1872."
"J. B. FREEMAN"
"
Chairman of the Board of Trustees of the"
"
Inhabitants of the Town of Moberly"
"ATTEST:"
"[SEAL] J. W. DORSEY,
Clerk"
"
Coupon No. 1"
"
$25] MOBERLY, RANDOLPH COUNTY, MISSOURI [$25"
"The municipal corporation of the inhabitants of the Town of
Moberly will pay the bearer, at the Bank of America, in the City of
New York, twenty-five dollars, on the first day of May, 1872, being
six months' interest on bond No. ___, for $500.00."
"J. W. DORSEY,
Clerk"
The petition also avers that the plaintiff is the holder of
coupons amounting to $4,200, originally annexed to these bonds, but
now detached from them, which are due and unpaid, for which sum he
asks judgment. To the petition the defendant demurred, on the
ground, among other things, that the act of the legislature under
which the bonds were issued is in conflict with the constitution of
the state, and that the petition does not state facts sufficient to
constitute a cause of action. The court sustained the demurrer, and
the plaintiff electing to stand upon his petition, final judgment
was entered thereon for the defendant.
The judges, however, were divided in opinion upon the questions
raised by the demurrer, and, in accordance with the
Page 103 U. S. 583
statute, have certified, for the decision of this Court, the
following points upon which they differed, namely:
First, whether the act of March 18, 1870, entitled "An
Act to authorize cities and towns to purchase lands, and donate,
lease, or sell the same to railroad companies," recited in the
bonds, is in conflict with sec. 14 of art. 11 of the Constitution
of Missouri.
Second, whether the petition states a valid and
sufficient cause of action.
The Act of March 18, 1870, under which the bonds were issued,
declares that
"It shall be lawful for the council of any city, or the trustees
of any incorporated town, to purchase lands, and to donate, lease,
or sell the same to any railroad company, upon such terms and
conditions as such board may deem proper, and for the purposes of
assisting and inducing such railroad company to locate and build
machine shops or other improvements upon such lands; and for such
purposes to levy taxes upon the taxable property of such city or
town, and to borrow money and to issue the bonds of such city or
town for such purposes,
provided a majority of the
qualified voters of such town or city, at a special election to be
held therein, shall assent to such purchase and donation."
Sec. 14 of art. 11 of the Constitution of Missouri of 1865, with
which it was contended the act conflicted, declares that
"The General Assembly shall not authorize any county, city, or
town to become a stockholder in, or to loan its credit to, any
company, association, or corporation, unless two-thirds of the
qualified voters of such county, city, or town, at a regular or
special election to be held therein, shall assent thereto."
To meet the objections to the alleged invalidity of the bonds,
the plaintiff cited the Act of the legislature of Feb. 16, 1872,
entitled
"An Act to protect counties, cities, and incorporated towns from
combinations between railroad companies, county courts, city
councils of cities, and boards of trustees of incorporated
towns,"
the first section of which declares that
"No county court of any county, city council of any city, nor
any board of trustees of any incorporated town, shall hereafter
have the right to donate, take, or subscribe stock for such
county,
Page 103 U. S. 584
city, or incorporated town, in, or loan the credit thereof to,
any railroad company, or other company, corporation, or association
unless authorized to do so by a vote of two-thirds of the qualified
voters of such county, city, or incorporated town. And any justice
of a county court, member of a city council, or member of a board
of trustees of any incorporated town, who shall hereafter vote to
donate, take, or subscribe stock for such county, city, or
incorporated town, in, or loan the credit thereof to, any railroad
company, or other company, corporation, or association, unless
authorized to do so by a vote of two-thirds of the qualified voters
of such county, city, or incorporated town, shall be adjudged
guilty of a felony, and on conviction thereof shall be punished by
imprisonment in the penitentiary for not less than two years."
Other sections repeal all acts or parts of acts inconsistent
with it. The act took effect on its passage. On the 29th of March,
1872, the legislature passed another act, in terms amending the
first section of the act of March 18, 1870, so as to read as
follows:
"It shall be lawful for the council of any city, or the trustees
of any incorporated town, to purchase land, and to donate, lease,
or sell the same to any railroad company, and to contract, for a
period of time not exceeding twenty years, with such railroad
company, for the payment of all or any part of the taxes which may
at any time be levied by the authorities of such town or city, and
for such town or city purposes only, upon property of such railroad
company, and upon such terms and conditions as such board of said
city or town may deem proper, for the purpose of assisting and
inducing said railroad company to locate and build machine, work,
or other shops, or other improvements, upon such land for the
purpose of such purchase, to levy taxes upon the taxable property
of such city or town, and to borrow money and issue the bonds of
such city or town for such purpose,
provided that
two-thirds of the qualified voters of such town or city, at a
regular or special election to be held therein, shall assent to
such purchase or donation."
This act took effect on its passage.
Page 103 U. S. 585
MR. JUSTICE FIELD, stating the case, delivered the opinion of
the Court.
The object of the inhibition in the state constitution was to
prevent the creation of debts by counties, cities, and towns on
behalf of any company, association, or corporation without the
assent of two-thirds of their qualified voters. The loan of their
credit, that is, the placing of their obligations for the payment
of money for the use of companies, was the usual mode in which they
incurred indebtedness. Aid in this way to companies, particularly
such as were organized for the construction of railroads, was given
so frequently by municipal bodies in Missouri, before the
Constitution of 1865 went into effect, as in many instances to
greatly embarrass and subject them to burdensome and oppressive
taxation to provide for the interest on their obligations and the
ultimate payment of the principal.
Numerous acts of the legislature had authorized officers of
counties and cities to subscribe for stock in railway companies,
and to issue bonds for their aid without limit as to amount and
without the previous assent of those who were to be taxed for their
payment. In many instances the road, in aid of which the bonds were
issued, was never constructed, and as no benefit resulted to the
counties and cities, their inhabitants naturally felt impatient
under the burdens which their officers had improvidently
imposed.
It was the purpose of the constitutional provision to check
these abuses, by requiring the previous assent of two-thirds of the
qualified voters of the municipal bodies before any more stock
should be subscribed by them or any further indebtedness be thus
incurred. The issue of obligations directly to the company,
association, or corporation, without such previous assent, is
within the letter of the prohibition, and to purchase property to
be given to such company, association, or corporation by the issue
of obligations to others, without such assent, is within its
spirit. Both modes of using the bonds of the municipality are
equally a use of its credit, the difference being that the one is a
direct and the other an indirect way of employing the credit of the
municipality for the benefit of the railway company. It would be a
narrow constitutional provision to hold constitutional provision to
hold that it prohibited the creation
Page 103 U. S. 586
of indebtedness by a municipality by a direct use of its credit
for the railway company, and yet permitted such creation by the
indirect use of it for the same purpose. A constitutional provision
should not be construed so as to defeat its evident purpose, but
rather so as to give it effective operation and suppress the
mischief at which it was aimed. In accordance with this principle,
this Court held in
Harshman v. Bates County that the
inhibition in question extended to townships in Missouri as well as
to counties, cities, and towns, although townships were not
mentioned. To contend, said the court, that the mere subdivision of
counties into townships enabled the legislature to evade the
constitutional provision is to ignore the manifest intention and
spirit of that instrument; that it could not be possible that it
was intended to restrict the legislature as to counties and not to
restrict it as to mere sectional portions of the counties.
92 U. S. 92 U.S.
569.
Considering the provision in this spirit, and looking at the
evil to be prevented, we are of opinion that the issue by the
defendant of its bonds to purchase lands, to be donated to the
railway here, was a loan of its credit which could not be made
without the assent of two-thirds of the qualified voters of the
city. It is true that a loan implies a return of the thing loaned
at some future day. A loan of credit would therefore seem to
require that the party receiving its benefit should provide for its
cancellation by the payment of the bonds issued. This being so, it
would be unreasonable to hold that, whilst the framers of the
constitution intended to prohibit a temporary use of the credit of
a municipality without the previous assent of two-thirds of its
qualified voters, they were willing that the absolute grant of the
credit should be made without such assent. We do not think that a
construction leading to such a conclusion is permissible. The Act
of March 18, 1870, must, therefore, be held to be in conflict with
the constitution of the state. It authorizes a majority of the
voters of a municipality to do that which the constitution declares
the legislature shall not authorize to be done except by the assent
of two-thirds of such voters.
The Supreme Court of Missouri has given a similar construction
to the constitutional provision. An act of the legislature
Page 103 U. S. 587
had, among other things, provided for the establishment of a
school of mines and metallurgy as a branch of the university of the
state, which was to be located in such county having mines as
should donate to the board of curators of the university, for
buildings and other purposes of the school, the greatest available
amount of money and bonds. The act authorized the county court, of
a county desirous of making a donation, to issue bonds of the
latter to be delivered to the board of curators and to be by them
sold, and the proceeds used in the purchase of the land and the
erection of the necessary buildings. Under this act, the County
Court of Phelps County ordered the issue of bonds, at different
times, amounting in all to $75,000, to be used as mentioned, and
their delivery to the curators. The order was made without the
assent of two-thirds of the qualified voters of the county, and,
upon the petition of the state, the sale of the bonds was enjoined,
the court holding that their issue was a loan of credit within the
constitutional inhibition, and that the act authorizing their
issue, without the sanction of two-thirds of the voters of the
county, was void. It stated that the object of the inhibition upon
county courts and city and town municipalities was to prevent them
from taxing the people without their assent. 57 Mo. 178.
The difference between that case and the one at bar is only in
the mode of effecting the same result. There the bonds were given
to the curators to be by them sold and the proceeds invested in the
establishment of the school of mines. Here the bonds were to be
sold by the municipality issuing them, and the proceeds used by it
in the purchase of lands to be donated to the railroad company. The
object of the loan in both cases, in authorizing the issue of the
bonds, was the purchase of property and the donation of it to
corporations. As remarked by counsel, it is difficult to see how
the fundamental law of the state could be evaded by a change of the
parties through whom the credit of the municipality is to be
converted into money. In either case the debt created is to be paid
by taxation.
The subsequent case of the
County Court of St Louis County
against Griswold does not change this decision. The bonds
there considered were issued to purchase lands in St. Louis for
Page 103 U. S. 588
a public park for the benefit of its inhabitants. There was no
loan of credit for the use of any other parties in the case. 58
id. 175.
The act of the legislature of Feb. 16, 1872, upon which much
reliance is placed by counsel for the plaintiff, is merely
prohibitory in its character, forbidding the officers of counties,
cities, and towns to donate, take, or subscribe stock in any
railroad or other company, corporation, or association, or the loan
of their credit, without the previous assent of two-thirds of their
qualified voters, and prescribing a punishment for a disregard of
its provisions. It confers, of itself, no authority. The inhibition
upon the officers of a county, city, or town to loan its credit
without the previous assent of others, was not an authority to loan
it when such assent was given. Authority to create an indebtedness
against a municipality, except on certain conditions, was not
conferred, because the attempt thus to create it was made
punishable as a crime. Further legislation was needed. Such was the
evident opinion of the legislature of the state, for, by an
additional act, passed on the 29th of March, 1872, the authority
was given in terms.
We answer, therefore, the first question certified to us in the
affirmative, and the second in the negative.
Judgment affirmed.
MR. JUSTICE HARLAN, dissenting.
The recitals in the bonds show that an election was held, in the
Town of Moberly, three days before the passage of the Act of March
29, 1872, to decide whether that town should purchase and donate to
the St. Louis, Kansas City, and Northern Railway Company, two
hundred acres of land for machine shop purposes; that two hundred
and twenty-eight votes were cast in favor of, and only one against,
such donation and purchase; that the bonds in question were issued
in pursuance of that election and of the orders of the board of
trustees of the town, made on the eighteenth day of April, 1872,
and that such orders were made in accordance with the aforesaid act
of March 18, 1870.
The circuit judge conceded it to be the settled law of Missouri
that municipal aid could be given to railroad companies
Page 103 U. S. 589
without infringing the constitution of the state, and that if
machine shops constituted an integral or essential part of a
railroad, or were necessary for its convenient use or operation,
then the Act of March 18, 1870, was not obnoxious to the principles
announced in
Loan Association v.
Topeka, 20 Wall. 655. But he was of opinion that
the issuing of the bonds in suit to be used in the purchase and
donation of lands to a railroad company for machine shop purposes
was a "loan of credit," upon the part of the town, within the
meaning of the state constitution; and that, consequently, the Act
of March 18, 1870, was unconstitutional, in that it permitted an
issue of bonds, for such purposes, upon the assent only of a
majority of the qualified voters of the municipality.
In the view which I take of this case, it is not necessary to
decide whether this transaction was, or not, a loan of credit. For,
assuming that it was, the petition must be regarded as stating a
valid and sufficient cause of action against the defendant if, at
the time of the election, held on the 26th of March, 1870, the Act
of March 17, 1870, had become so modified by subsequent
legislation, as to require the assent of two-thirds of the
qualified voters of the town as a condition precedent to any issue
of bonds to be applied in the purchase of lands to be donated to
the railroad company for machine shop purposes. And such, I think,
was the legal effect of the Act of Feb. 16, 1872. The first clause
of its first section declares, that
"No county court of any county, city council of any city, nor
any board of trustees of any incorporated town, shall hereafter
have the right to donate, take, or subscribe stock for such county,
city, or incorporated town, in, or loan the credit thereof to, any
railroad company . . . unless authorized to do so by a vote of
two-thirds of the qualified voters of such county, city, or
incorporated town."
The general assembly, of course, knew when they passed the law
of Feb. 16, 1872, that the previous statute of March 18, 1870, had
assumed to authorize counties, cities, and towns to make donations
to railroad companies, for machine shop purposes, upon a bare
majority vote of the qualified electors. The prohibition against
donations thereafter, except with the sanction of two-thirds of the
qualified voters, was, in view of former legislation, equivalent to
an affirmative recognition
Page 103 U. S. 590
of power thereafter to make such donations in pursuance of the
provisions of the Act of Feb. 16, 1872. That act imported into the
Act of March 18, 1870, the requirement of a two-thirds affirmative
vote as a condition precedent to any donation of land for machine
shop purposes. The express repeal, by the Act of Feb. 16, 1872, of
all parts of laws inconsistent therewith, evinces a purpose, upon
the part of the General Assembly, to do something more than declare
a violation of that act, by any of the officers therein named, to
be a felony. Nor was it intended to withdraw from counties, cities,
and towns authority, under any circumstances, to make such
donations. Manifestly there was also a purpose to provide against
the possibility of donations or loans of credit, under any existing
statute, except with the express sanction of two-thirds of the
qualified voters of the municipality. The only difficulty in the
way of this conclusion arises from the negative character of the
language of the first clause of the act of Feb. 16, 1872. But that
difficulty seems to be removed by the fact that a previous statute
having assumed to confer upon counties cities, and towns the power
to make donations to railroad companies for machine shop purposes,
the object of the act of Feb. 16, 1872, was thereafter to require
the previous assent of two-thirds of the electors, and to repeal
all acts or parts of acts inconsistent with that requirement. The
bonds, upon their face, show the assent of all the electors voting
except one. Had these bonds recited, in terms, that they were
issued in pursuance of the Act of March 18, 1870, as modified by
subsequent legislation, there would have been no ground upon which
to question the authority to issue them.
But the rights of the purchaser of the bonds should not be
sacrificed because the reference to the statute, by authority of
which they were issued, was not full or technically accurate. When
the election was held, the statute of March 18, 1870, as modified
by that of Feb. 16, 1872, authorized an issue of bonds for the
purchase of lands to be donated for machine shop purposes,
two-thirds of the qualified voters of the town assenting thereto.
The provisions of that statute, as thus modified, seem to have been
complied with.
I am of opinion that the act of March 29, 1872, passed after
Page 103 U. S. 591
the election of March 26, 1870, was only cumulative legislation
so far as it related to subjects embraced in the Act of March 17,
1870, as modified by the Act of Feb. 16, 1872. I think that the Act
of March 17, 1870, as modified by the Act of Feb. 16, 1872, was
constitutional, and that the petition states a good cause of action
against the defendant, even if the issue, by the town, of bonds for
the purposes indicated, was a loan of credit, within the meaning of
the state constitution.
For these reasons I feel obliged to dissent from the opinion and
judgment.
